HARM DONE TO THE COOPERAGE INDUSTRY

The wooden barrel and keg, the standard liquor containers for centuries, have been outlawed as containers for distribution and sale of spirits. The glassbottle industry, dominated by one firm, has been granted a virtual monopoly at the expense of the cooperage industry. The cooperage industry does not ask a monopoly; it simply seeks the right to be able to compete with the bottle industry in this field on an equal basis. It asks that the distiller and the liquor dealer be given a chance to chose between the bottle and the barrel, and to use one or both for distribution and sale if he so desires.

It is certainly not the desire nor the intent of the Government to set up a monopoly for one industry at the expense of another under the guise of law enforcement.

The cooperage industry has suffered much damage through these regulations. Thousands of men have been thrown out of work, in the woods cutting the timber, in hauling operations, in the stave mills and in the barrel plants. Firms manufacturing kegs of a capacity under the standard, 48-gallon ageing barrel have no market for their product. Farmers and timber owners who had planned to sell their oak timber to tide them over the drought and the depression have been unable to do so.

A questionnaire survey of the cooperage industry indicates that 67 of the leading firms in the industry could employ approximately 8,000 more men and could increase their business by 25.5 percent if bulk sales were made legal.

ADVANTAGES OF BULK SALES

It should be apparent that as long as there is a profit in criminal enterprises, there will always be criminals. The way to eliminate the bootlegger is to cut down the profit incentive to a point where the proceeds will not be worth the risk involved. Legalization of bulk sales would be a most important step. It would make a good quality of liquor available to the consumer at a reasonable price. It would eliminate the cost of bottles, caps, labels, cartons, cases, bottling machinery, increased freight rates, increased storage and handling charges, etc. Whisky does not age under the specific meaning of the term in bottles, but does in barrels. If the dealer could purchase in bulk, he could withdraw his spirits as needed while the remainder was improving in quality and in value through storage in the wood. The small distiller would be able to market his warehouse receipts to hotels and dealers to finance his operations, and the buyers would have assurance that they could obtain the spirits from the warehouse. The public will not be forced to buy millions of dollars worth of bottles each year which it is forced to destroy.

SUMMARY

The Treasury Department contends that bottling restrictions are necessary for protection of the revenue. They have advanced no proof of this assertion. On the contrary, preprohibition experience indicates that bulk sales can be readily controlled.

The Treasury Department contends that a barrel can be tampered with and that brands and markings can be removed. A barrel cannot be tampered with more easily than a bottle. One barrel of 48 gallons certainly is easier to check and keep track of than 384 pints. Field agents of the Internal Revenue Bureau, with prephobition experience, confirm these statements. Experienced liquor field men know that markings cut and branded into a barrel cannot be removed without leaving easily detected evidence.

The Federal Alcohol Control Administration contends that the States do not want bulk distribution and sale. No proof has been given to support this statement. Furthermore, any State would be at liberty to prohibit bulk distribution and sale within its borders if it so desires.

The CHAIRMAN. The Chair inadvertently overlooked one witness. Mr. Morris O. Alprin.

STATEMENT OF MORRIS 0. ALPRIN, NEW YORK CITY, APPEARING AS COUNSEL ON BEHALF OF THE WHOLESALE WINE AND SPIRITS MERCHANTS ASSOCIATION OF NEW YORK

Mr. ALPRIN. Mr. Chairman and members of the committee, on behalf of the wholesalers of New York I appear before you to offer some suggestions on the bill before you.

On page 4, section 2 (d), line 4, Mr. Choate has asked, on behalf of this proposed agency and the administrator, that responsibility follow power. There is a lot of truth in that. On the other hand, we of the industry ask that justice be tempered with mercy and wisdom with experience. We ask this amendment: After the word "regulations" insert the words "after due opportunity for public hearing by members of the industry affected thereby."

When any such proposed regulations are being considered, the F. A. C. A. in the past has very judiciously asked for the experience of the industry on such regulations. We ask that in the future the same agency set up by you should give the industry the same opportunity to be heard in advance of any regulation.

On page 5, line 19, we ask that after the word "person" you insert the words "or any State agency."

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On page 23, line 5

Mr. McCORMACK. You have got something on page 7, have you not? Mr. ALPRIN. No.

On page 23, line 5, after the word "enterprise" insert the words or any State

alcoholic bevegency engaged in the manufacture or distribution of

The purpose of that is to get the State agencies, the monopoly systems, under the control of this proposed agency.

As you know, various of the acts setting up these monopolies have incorporated in the act the right of the State to manufacture and sell liquor. At the present time some of the State agencies who are indebted to people who have sold them merchandise are practically coercing these people into taking back merchandise of other people in part payment of their bills, and they are also asking others who attempt to sell to State agencies to take back the merchandise of other distributors and importers before the goods are sold.

Mr. McCORMACK. What evidence have you got on that?
Mr. ALPRIN. The State of Pennsylvania.

Mr. McCORMACK. Can you produce evidence?

Mr. ALPRIN. I have no evidence outside of what industry members have reported. We do know that the distillers have lots of merchandise returned by State stores in part payment of their bills. I think that regulations should be under the jurisdiction of this proposed agency.

The State of Ohio today is asking practically for a consignmentsale basis before it accepts the merchandise of anybody who tries to sell to it. They will put the goods in warehouse, and if and when they sell them you get paid, as withdrawn from the warehouse. That is one of the unlawful practices in section 5, and we believe that the State monopoly should be under the same rules and restrictions as any other private legal business.

On page 7, line 6, after the word "brewer ", we ask that yoù insert the word "wholesaler." It is rather an anomaly that in subdivision

1 of section 4 the distillers, rectifiers, wine brewers, and importers get a permit, whereas wholesalers, who are producers, must make application for a permit. The wholesalers, just the same as other people mentioned in section 1, have already received permits from the F. A. C. A.-just the same as the people mentioned in section 1and the wholesalers must make application for a new permit, whereas the other members of the alcoholic beverage industries will get their permits.

On page 11, line 13, we ask that you strike out the words "circuit court of appeals " and insert the words "district court."

Congressman Celler, I understand. is appearing on that point as a member of the Judiciary Committee, and I defer my remarks to Congressman Celler on that subject.

On page 12, lines 5 and 6, we ask that the words "the finding of the Administrator as to the facts as supported by substantial evidence shall be conclusive " shall be omitted.

Inasmuch as this act practically creates a czar of the industry, we believe that if entrusted to a man who will not wisely or properly administer the act, that there is great danger for the industry, and therefore that tremendous power should be very carefully considered before it is invested in one individual.

On page 13. lines 3 and 4, we ask that the words " specifically ordered by the court" shall be stricken out.

not, unless As I pointed out, a czar of the industry may put out an order to suspend or revoke a permittee's license. Inasmuch as some of the provisions contained in the bill, and specifically section 5, may involve questions of opinion as to interpretation of some of these labeling regulations, or advertising regulations, an infraction of any of those regulations subjects a permittee to a fine for the misdemeanor and also a suspension of his license. We therefore say that in the event of the abuse of discretion, that a permittee shall have a right to go into court and by obtaining an order automatically stay the administrator's order. An innocent permittee, acting under the captious move of some administrator, may suffer irreparable damage as a result of such order, and until he gets some relief in the courts, should have that order suspended until the courts finally decide on the question.

On page 10, line 10

Mr. McCORMACK. Mr. Chairman, I do not want to interrupt, but that policy is carried out in other laws, is it not?

Mr. ALPRIN. Yes.

Mr. McCORMACK. Has the court granted the right to continue business, pending judicial determination?

Mr. ALPRIN. In some cases, yes; and in other cases the orders are final, subject to a stay being secured in the court. In other words, in some cases a man can continue, and, in other cases, he may not be able to continue. In view of the tremendous power being invested in the administrator, and the irreparable damage to a permittee, especially in view of the labeling and advertising regulations which have been enacted or which will be established, with various interpretations, we feel that a penalty for one of those causes should not operate until the court determines the question.

On page 10, line 10, we ask that after the word "fact", the last word of the paragraph, you insert the words "Provided, however,

That for a first violation of any of the provisions of section 5 of this act the penalty therefor shall be a fine of not more than $1,000 for each offense and subject to the approval of the Attorney General, the administrator is authorized prior to commencement of court proceedings with respect to the violation of section 5 of this act to compromise the legality arising with respect to such violation upon payment of a sum not in excess of $500 for each offense to be collected by the administrator and to be paid into the Treasury as a miscellaneous receipt; for a second violation of section 5 of this act the administrator may suspend the permit of the violator and in addition thereto inflict a fine of not more than $1,000 for each offense, which may be compromised as herein set forth; and for any subsequent violation of section 5 of this act the administrator may revoke the permit of such violator."

Mr. VINSON. Have you not got that compromise power in section 6 of this act?

Mr. ALPRIN. We have.

Mr. VINSON. Why do you want to repeat it? I refer specifically to violations of section 5.

Mr. ALPRIN. That is correct. Under the act as it is written, a violation of section 5, or any section of the act, subjects the violator to a fine of $1,000; and, in addition thereto, a suspension of his permit, or a possible suspension of his permit.

Mr. VINSON. I am not speaking about the first violation but about the compromise part.

Mr. ALPRIN. Yes, sir.

Mr. VINSON. The compromise part is in section 6.

Mr. ALPRIN. That is correct.

Mr. VINSON. There would not be any need to repeat it here.

Mr. ALPRIN. No; you could leave it out. The purpose of this proposed amendment is that in the event a permittee misjudges innocently or does not understand the regulation entirely, it causes him, possibly, to commit a violation of the advertising or labeling regulations; for example, so that he be not subject to a fine and a suspension; that for a first violation for that cause it should be limited to a fine only.

Mr. VINSON. Being a young fellow and inexperienced?

Mr. ALPRIN. Something along those lines.

On page 17, line 20, we ask that the words " after purchase at any Government sale " be omitted.

For the information of this committee, the Government is selling merchandise, which is seized and forfeited to the use of the United States, at public and private sale. It has gotten to be so bad that it is reported that certain people bring in illegally this liquor, cause it to be seized, and then purchase it, the reason being that if they bring it in legally the tax on a case of liquor is $2 a gallon for internal revenue and $5 duty, which would amount to about $20 per case. The merchandise costs from $5 to $15 per case, making a total of $35 to $40 per case. When the goods are sold by the Government the Government realizes from $7 to $15 a case, including all taxes and duties. When a man gets that merchandise and puts it in competition with legal merchandise it causes a great detriment to the other members of the industry and it deprives the Government of legal revenue.

We propose that an amendment be added in this act, which is on the last page of my memorandum, that the Government, instead of selling this seized liquor, shall order it to be destroyed or turned over to a hospital, or any other charitable institution.

We feel that the continued sale of these goods by the Government not only is an injustice to the legal industry but it actually takes money out of the Treasury of the United States, in that this liquor does not produce to the Government the revenue that a case of legal liquor does.

The CHAIRMAN. Do you mean to say that under the present law or rules and regulations that if liquor is brought in unlawfully into the United States, and is captured by some agent of the Government, and sold at auction sale, that the purchaser of the liquor then has the right to sell it without paying any taxes at all? Mr. ALPRIN. That is correct, Mr. Chairman.

The CHAIRMAN. He is at liberty to sell it without paying taxes? Mr. ALPRIN. That is correct. All taxes are deemed to be paid. Mr. VINSON. I think that our friend from Massachusetts, Mr. McCormack, probably will report some legislation on that point in the near future.

Mr. CULLEN. Mr. Chairman, I want to ask the gentleman a question. What was the method which you pursued prior to prohibition? Was not that liquor confiscated and destroyed?

Mr. ALPRIN. That liquor was confiscated and, I believe, turned over to hospitals, although the Revised Statutes provided that the district judge might, in his discretion, sell the merchandise.

Mr. FULLER. As counsel for the Wholesale Wine & Spirits Merchants Association of New York, do you know how they stand on bulk sales?

Mr. ALPRIN. The State association has taken no stand on bulk sales, for the reason that the laws of New York State do not permit the sale of alcoholic beverage in bulk, and I take it the legislature and Commissioner Mulrooney have been against that, of course. Mr. FULLER. Does that have reference to wine?

Mr. ALPRIN. Just in the State of New York. There is a question of opinion. Many members feel they should get that right, but they would have to overcome the Legislature of the State of New York on that point, even if you gentlemen have given the right to the people throughout the country.

Mr. FULLER. Would that reduce the price of liquor?

Mr. ALPRIN. I think it would.

Mr. WOODRUFF. Does that apply to fermented wines also?

Mr. ALPRIN. All citizens?

Mr. WOODRUFF. The laws of the State of New York on bulk sales. Mr. ALPRIN. Up to 15 gallons is permitted to be sold in bulk. Mr. KNUTSON. Did I understand you to say that much of the seized liquor was sold at private sales?

Mr. ALPRIN. Some public and some private. They permit individuals to come up and buy it for personal consumption.

Mr. KNUTSON. Have you any information as to the average price for a case of Scotch whisky, that is, the price which it brings at those sales?

Mr. ALPRIN. Yes, sir; in New York, for the eastern and southern districts, goods have sold from $7 to $14 or $15 per case.